Cannabis stocks were higher across the board on Tuesday, as investors digested the first earnings reports of the season and a first look at a pot banking bill that Democrats are hoping to pass in 2019.

Aurora Cannabis Inc.
ACB, -0.14%ACB, +0.00%
shares was last trading up 2%, after the company said it nearly quadrupled revenue and gained strong market share in its second fiscal quarter, but also had large losses due to a decline in marijuana-related equities. Aurora has invested heavily in other companies in the sector and must track their performance as part of its earnings. Those adjustments accounted for about C$190 million ($143 million) of its losses and came after a selloff in the sector.

The numbers reflect the first full quarter since the launch of legal cannabis sales in Canada in October, the first industrialized nation to allow recreational sales of the substance. Aurora said C$21.6 million of its total sales of C$54.2 million came from Canada, which has suffered shortages at the start of the new regime.

Supreme Cannabis Co. Inc.
FIRE, -0.51%SPRWF, -0.68%
shares were down 3% after the company posted earnings for its fiscal second quarter. The company had a net loss of C$1.55 million, or 1 cent a share, in its fiscal second quarter to Dec. 31, narrower than the C$2.03 million, or 1 cent a share, posted in the year-earlier period. Revenue rose to $7.72 million from $1.68 million.

The company may have been overly optimistic in valuing its cannabis plants before sale, however. Supreme said the fair value changes on the growth of its biological assets came to C$10 million, but the realized fair value changes on inventory sold or impaired was C$6 million. Combining the C$6 million with the C$4 million of production costs exceeds the C$7.72 million revenue number.

Under International Financial Reporting Standards, or IFRS, the standard used in Canada, companies are required to report the value of a biological asset at different stages of its development as a way to smooth earnings over time. For cannabis companies, it means they must book the theoretical value of the crop before they have sold it, according to Mike Miller, finance director at private-equity firm White Sheep Corp. If they end up selling it for less than the value they assigned it, they will need to make an adjustment in the following quarter.

“The cannabis market has seen huge volatility in price, which makes it difficult to guess what the biological assets are worth,” he said. With the industry still in its infancy, there are no futures markets to help with pricing and many price estimates were based on medical cannabis prices which were higher than the prices retailers could get for recreational cannabis, he said.

“If it were 100% accurate, the revenue number should equal production cost and the adjustment and zero out. This is going to be an issue for many companies this earnings season, and until the industry matures,” he said.

Bierman said Parker worked at MedMen for less than 18 months before he resigned last November and has now “filed a baseless, wrongful termination lawsuit for his financial gain. We will vigorously defend ourselves in court,” he told MarketWatch in a statement.

Parker’s suit alleges that he was constructively terminated without cause and that had to turn “a blind eye and a deaf ear to improper and unlawful behavior” at the company. The executive further alleged that he was “confronted with an environment replete with racial, homophobic and misogynistic epithets and slurs, drug and alcohol abuse, personal humiliation occasioned by the words and deeds of the CEO and President of the company,“ among other issues.

Bierman said he has been married to a Latina woman for the past 15 years, while MedMen co-founder Andrew Modlin is an openly gay man.

The New York Medical Cannabis Industry Association has cut ties with MedMen over the allegations, the company said, confirming a report in the Daily News. Daniel Yi, senior vice president of corporate communications at MedMen, said the company “supports the collective cause of the licensed registered organizations in New York.

“We will remain active in conversations about the full legalization of cannabis. This is an important discussion and we will continue to take part,” he told MarketWatch in emailed comments. MedMen shares were down 5%.

Meanwhile, U.S. congressional Democratic leaders have circulated a draft of a bill that would allow cannabis companies put their profits in banks, according to Marijuana Moment, a website that works with activists, industry representatives and policy makers on trends affecting cannabis.

The lack of access to banks—and capital markets—because of the federal ban on cannabis has hampered the development of the sector. The bill was released by the House Financial Services Committee ahead of a meeting scheduled for Wednesday on the topic. Democrats are looking at other legislative measures in 2019 to promote the sector, including tax fairness, medical access for military veterans and removing the current barriers to medical research, according to Marijuana Moment.

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